Are you looking to buy a business?

A great way to expand your business empire is to purchase an existing company, either through buying out a close competitor or just dipping your toe in the water and buying a business as part of a group. In either you need ensure that you’re buying a viable business and not a dud!

The way to avoid any issues is to make sure you’re doing your research before you make any commitments, we’ve included a few key questions to ask before you shell out any money.

Why is the business being sold?

There are many reasons for a business to be sold, and not all of them are good. It could just be that the business is thriving, but the owner is retiring and looking to a final pay out for their retirement. On the other hand, it could be that sales are dropping year on year, the business could have mounting debts or internal problems with staff. In any case its always best to find out why the business is being sold.

What is the state of the industry?

Doing research into the industry the business is in, their competitors and the general marketplace can help you decide if the investment is going to be worth it or if it’s going to just cost you money in the long run. You aren’t going to want to invest your money into an industry that has no potential for growth, or even worse an industry that is actually shrinking. Looking at predictions and forecasts, not only of the business you’re looking to buy but the industry as a whole can help you make an informed decision.

Have you done your due diligence?

This is a major question to ask yourself, have you done your due diligence to make sure there aren’t any financial, legal or HR issues that suddenly jump out of the closet. Once you’ve taken ownership of the business all these issues become yours, whether they happened before you bought the business or not. You’ll need to check are there any unpaid tax bills, are any loans being defaulted on, have all the company tax returns and accounts been filed or are there any current or potential legal cases on the horizon. These aren’t a comprehensive list but it’s a good start of things to investigate.

Is there an existing business plan in place?

Every business needs a plan to help push it forwards and help it grow, but do the current owners have one in place or do you need to create a plan yourself? It always helpful to have a business plan already in place, especially in an industry you might not have experience in. However, no plan is ever set in stone and will need to be reviewed and updated.

Are the staff and management up to scratch?

Normally when you buy a business you’ll inherit the staff, which can usually make the process smoother as they already know the business and industry. However, this is not always the case, and you’ll need to ask yourself are the staff up to scratch and will they help you grow the business. Does the management, and staff in general, have the skills and motivation to help you grow the business? Do you have enough staff to push the business ahead in the way you want to?

This isn’t an extensive list of questions to be asked but it’s a good starting point! The purchasing process can be a complex and long process. If you’re in the market for a business acquisition do get in contact with us so that we can help make the process as smooth as possible.

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